Landlords need to prepare for HM Revenue & Customs’ (HMRC) new Making Tax Digital (MTD) for Income Tax regulations.
As part of the Government’s attempts to modernise the tax system, landlords and self-employed people will be required to submit their tax information via MTD-compatible software from 6 April 2023.
In addition to the annual submission, landlords will also be required to complete four quarterly tax summaries throughout the year, for a total of five submissions a year.
HMRC has said it will be fairly lenient while everyone gets used to the new approach, but investors must be ready from day one.
The 2023 date is when anyone making more than £10,000 a year from property should be ready to start recording and filing online. For landlords, that £10,000 figure refers to rental income, not profit.
It’s not just a case of switching over to a new online tax reporting system. Landlords must be ready for the big day by signing up for software that aligns with HMRC’s online process.
To comply with HMRC’s new rules, landlords must also keep digital records. The reason for this, says the Government, is to prevent mistakes.
Updating accounts throughout the year should mean landlords are less likely to miss out on expenses because of lost receipts and should give investors a better appreciation of their annual income.
Landlords can also keep a better eye on cash flow, and it is easier to share tax details with an accountant or letting agent since they are all in the one place.
Despite having to send quarterly updates of income and expenses via the software and HMRC’s digital tax account, Landlords will still have until 31 January in the year following the end of the tax year to pay what is due.
Do your clients need help getting ready for MTD? Find out how we can help them prepare your tax and accounting process for this landmark change in legislation.
